i'm becky quick along with joe kernen and andrew ross sorkin. our top story is the global markets. the dow closing yesterday at its highest level since december of 2007, that was the start of the so-called great recession. nearly four stocks rose for every one that fell and risk is back in play. global stocks and commodities are rallying. the primary driver is the fed. the central bank pledge to go spend $40 billion a month to buy mortgage bonds for as long as it deems necessary, it plans to keep short term interest rates at record lows. that's right, you heard correct, at least through mid 2015. and that is six months longer than previously planned. ben bernanke says he is ready to try other measures if hiring doesn't pick up, so you're talking about a full court press here. here he is speaking to the financial press yesterday. >> the employment situation, however, remains a grave concern. while the economy appears to be on a path of moderate recovery, it isn't growing fast enough to make significant progress

reducing unemployment rate. you fewer than half of the 8 million jobs lost in the recession have been restored. and at 8.1%, the unemployment rate is nearly unchanged since the beginning of the year and is well above normal levels. >> we will talk about the fed this morning, ask what's next if anything, ask if any of these measures are actually going to work to bring down unemployment and of course we'll be looking for where you should be putting your money. among our newsmakers this morning, former fed governor kevin warsh will be our guest host at 7:00. plus as joe mentioned, europes also playing a major role. michelle caruso-cabrera sat down with jean claude trichet earl i didn't this morning and she'll bring us that conversation in just a few minutes. and then the issue of the markets, the economy and politics. our special guest at 8:00 is former new york city mayor and now romney supporter rudy giuliani. obviously we have a lot to get to, but first let's get you up to speed on the other headlines. >> we're on euro watch. the euro ministers are meeting

in cypress today to discuss rescue items. among the items, greece's struggle to stick to bailout commitments. and spain's deliberations on whether to tap the ecb bond buying program. draghi and christine lagarde are both there. speaking of draghi, he's telling a german newspaper that europe is seeing positive results from the central bank's bond buying program. but the ecb president is conceding that he still has work to do to convince some in germany and says he could address lawmakers there. in other news, ecb is denying reports this morning that it is in talks on a spanish bailout. it is saying it is not. earlier today, a dutch financial daily said that the ecb was negotiating with the imf on a $300 billion euro rescue fund for madrid. the package would pave the way for the central bank to buy span, bonds to lower borrowing costs. in the meantime, greece is denying reports that it will need a third bailout. the euro weakened against the dollar on that report at this point, international inspectors

are in the process of mulling handling over the next tranche. so we'll keep our eyes on that. >> corporate new, avo thin says sec doesn't plan on taking any action that led to a year long investigation that led to the firing of avon's former vice chairman. the sec was trying to see where cramb shared information -- the sigh could i trust is psychiatrist is jung. pull fraud back into the real world a little bit. any way, the probe which go i don't even like to say that word either, probing and chamb in the

same sentence, anyway, material he shared with a citigroup an li and home depot will close all stores in china and cut 850 jobs there. the retailer changing its focus on-to-speci to specialty stores. it's a do it for me market, not do it yourself market. and bank of america agrees to settle allegations that it discriminated on mortgage loan applications. the bank asked them to provide medical information from a doctor and in doing so, the toj says the financial giant violated the fair housing act and equal credit opportunity t act. they will pay between $1,000 to $5,000 to eligible applicants who were asked to provide a letter from their doctor to document income. try to think about what causes me to have such backup for

things i got to get off my chest. i think it's because i was an only child and this whole bernanke thing has got me -- >> me, 00. i was running numbers. i was trying to figure out what i think of this whole thing and i've been a huge supporter of what he's done to this point, but at this point, it's -- >> now you're over? >> my first question, faber was on earlier and i love him. >> and i have to agree with him. >> he said a year and a half ago and we laughed, you know, qe-3, 15, 16, 17, it's called qe-3, but -- >> it's qe infinity. >> what is the actual number? we have to give it at least four or five and six. >> i almost tweeted this this morning. it's not qe-3, it's qe infinity because there is no end in sight and we have tied to the unemployment rate which by the way the unemployment rate will get worse before it gets better if people come back into the job market. >> why do they think it will be

under 7% by the end of 2014? >> i don't know, but the things that used to generate job growth, we've given up on those. and the other thing, i wanted to look at -- i think about oil. isn't it perfect today? crossing over 100. i was going to look at a one year chart to see if when qe-3 when we started talking more and more about it, you can just see it and the people that deny that qe -- they're perfectly willing to say qe-3 helps the stock market which is an asset. why can't they admit that -- >> they won't say other assets are affected by that. >> look at the euro. that's right when qe-3 started getting more and more likely. and then i think about greenspan and bush 1 and the really hostile relationship that resulted from greenspan not acting before the election which bush lost. and you just can't deny that there are -- it's september. and there are 55 days to the election and we are pulling out the stops. and the market was up over 1.5%

yesterday. >> so here's my question on that. if we don't think it's going to work, then explain the markets. >> because money has to go somewhere. >> the entire world, central banks are -- but the gains that you're getting, if you're purchasing power eventually is diminished by all this currency, they're faux gains. they're not real. >> i was listening to faber, too, on "worldwide exchange" and what he says made me start thinking that ben bernanke is helping out the people at the top of the income scales. this is good news for anybody who has a lot of money in stockstock stocks. you don't qualify for it if you're at the lower levels of the income, so you're helping the top. he's the almost trickle down economics guy which i don't understand why the republicans want to fire him and the democrats want to keep him in. >> it just looks -- it's not that hard to figure out if you

see if the dollar is going to go down, of course anything that's not denominated in dollars is going to cost more. i was thinking about what else -- i had one other point that i -- >> i ran some numbers on it because at this point the fed's balance sheet has increased already $2 trillion since they started this. that means when you take back the 40 billion that they'll be spending and the 45 billion that they already are spending on operation twist, it gets you to about $7,000 for every man, woman and child. so you could have just sent a check home for every single person in this country for $7,000 and it will increase by $283 a month for every person. >> the dual mandate where unemployment is part of the fed's -- this is the biggest double down you've ever seen on saying, yeah, we accept that responsibility and we're going to do something about it. but, see, i think that they think our other mandate is fine, our price stability, we don't need to worry about that. but they think they're flying or

you jump off a building and you don't know you're not flying up you you slam into the payment. >> and greenspan has told us on this show that they had the dual mandate then, too, but they always worried about the price inflation aspect and figured if you can keep trog of that, tcan that the rest would work out. >> did you hear anyone say that it wasn't enough? >> was there somebody out there who said that? >> no, after it happened, i don't think there was a single person -- >> bill purcell calling it right yesterday. >> anyway, a lot of it has to do with when chuck todd comes on with these new numbers, too. but i want to know in the past were polls not as good as they are now? >> it was also taken september 9th through 11th. there's a new maris poll, chuck todd will be talking to us about it at 7:30. it takes a look --

>> "usa today" has a different one. >> but it was taken between the 9th and 11th. republican strategists say there's still a lot of sugar high in it. >> and rasmussen is back to a one point romney lead. everyone presents it as challenges for romney. no one saying that it's just -- it would be a challenge for romney to overcome, but at this point, i don't know. >> before we go to michelle, we he should point out the markets. the dow up by over 200 points. a gain of 1.5%. you're back at the highest level since december of 2007. all ten of the s&p 500 sectors closed up by over 1%. and half of those sectors were up at 52 week highs. and again even after all that activity yesterday, you do see the dow another 43 points above fair value this morning. commodities rallied, crude oil settled at a four month high. gold and silver hit a six month high. euro touched 130 for the first

time since may 9th. so if you think it wasn't a big deal, you you can look at about any stock and watch the implications. >> let's get to michelle caruso-cabrera in madrid. she sat down with trichet earlier this morning. michelle. >> good morning, lady and gentlemen. loved hearing your discussion that fits in with this whole thing we've been talking about this morning. jean claude trichet just finished a speech at the. this is a big important business school here in spain. before he did that speech, he sat down with me. i asked him about ben bernanke's move yesterday. he refused to comment on what he calls sister sthugss. he says the move is a reflection of how difficult the economy is. xwlo draghi's new program, what does he think about it, he's extremely supportive of it. he doesn't see as revolutionary. he says twice under my leadership the ecb bought government securities in unlimited amounts over the same

duration. so he thinks it's progress. he thinks it's important that governments have to meet conditions in order to get the help. and finally i said is it going to work? he said yes. >> not only making the working assumption that it will work, but it is stream importance for not only europe, not only the euro area, but the rest of the world. and again, it depends now crucially on governments individually, the governments that have to adjust and collectively through the efsf, esm, to deliver. in the past, they did not deliver always rapidly and i would say actively what they had decided. >> ben bernanke's announcement yesterday that he's going to purchase mortgages and potentially other assets until we see unemployment improve in

the united states, is that a good decision on his part? >> it's not my habit to comment on decisions of the sister institutions. i would only say that it demonstrates, also, that when you look at the advanced economy through the grade of the central banking, you see that we are all engaged in nonstandard measures. >> how worried are you about the fiscal cliff in the united states is this. >> i think it is part of course of the major issue that in the advanced world you have to cope with. >> but if it happens, does it bring on another recession in the united states? >> i'm sure that the u.s. leadership, whatever you have in the president discussion of course between the two major sensitivities, but a sense of the saw peer kror interests of the country will prevail. i'm absolutely confident in

that. i don't trust that it is possible that the sense of the superior interests of the united states of america and by way of consequence of the entire of course advanced economy and by way of consequence the entire world. so i remain confident. >> and you have lot more faith in politicians than many people do. >> perhaps. >> you notice he looks a lot more relaxed thaf eed than he h past. in the next hour, we'll tell you what he said about senior bank debt. it will mean dramatic changes for bond investors around the world to invest in european banks. back to you. >> michelle, weigh in on 245 conversation we were just having in your relationship, in koyour conversations with trichet, this affects not only the u.s. markets, but their market, too. probably frustrating for everybody else. >> i asked trichet, because of what's happening around the world, there's a bigger cry in

the united states among some people for some people hike a gold standard and he said that so far the pers in europe have been commensurate with the situation and absolutely meet the needs. and in a broader sense, carlos slim said to me once, in every financial crisis, either the savers pay or the debtors pay. i can tell you right now that in this crisis, the savers are going to pay. that's what happens when governments try to inflate hair way out of a crisis. and anybody familiar with latin america knows the poor always suffer in that situation.and an america knows the poor always suffer in that situation.way ou. and anybody familiar with latin america knows the poor always suffer in that situation. they he have to pay a lot more for cooking oil and food and to feed themselves. so that tradeoff is deeply understood. >> trichet will say i don't like what bernanke is doing? he totally covered everything he wants for do. and as a -- i don't know if i'd call you a monetest, but can we

just call these extraordinary measures by the fed, it's not commerce, it's not fiscal, is it keynesianism thinking that we can just do this and solve everything by throwing money at it or is it not? >> that is very interesting. i've never thought of it in terms of keynesianism versus nonkeynesianism. trichet calls them nonstandard measures. in the world of central banking, when you don't have -- when you have a fiat currency, this is considered to be class ib centrclass being central banking. it is the core discussion of our time in terms of the economic staft the world. >> the people that hate keynesian inch haism hate this,e might be something to it. the austrian school, those guys are -- the ones that are alive are rolling the eyes and the ones dead are rolling in their

grave, i think. >> i would say this, that most of the people who hate keynesianism would also like to see tax cuts and ultimately those two things are about -- are similar in that they're just trying to inject more money into the economy. does the government spend the money or do you cut taxes and give it more to people for them to spend the money. >> if you do the enemy of my enemy, you can be friends and enemies with everybody. you don't know where you're -- i don't know. just thinking. all right. thank you. >> when we come back, what do the founder of linkedin and the man who started ebay all have in common? yes, they are all successful businessmen, but they are the making a new investment in an up likely place. before we head to a break, my pick for the squawk sports story of the morning, college football rutgerss beating south florida last night 23-13. big upset. scarlet knights snapped a tie on a it field goal with less than three minutes remaining in the

game. we'll have a little more than a minute later, rutgers scored a touchdown. >> is this even aaa? >> yes. >> is it a two year hfr -- >> they're four year schools. you know this very well. you're just mad because you don't have a team you can brad about right now. >> cincinnati. i was downstairs making coffee, and we heard it. it just came crashing through the roof, out of nowhere. what is it? it's our ira. any idea what coulda caused this? maybe. i just sorta threw a little money here, a little money there. and i loaded up on something my dentist told me was hot. yeah. ♪

if you are just waking up,

u.s. equity futures after yesterday's huge market rally are up once again this morning. right now the dow futures up by another 46. s&p 500 up by another 4 1/2. and again, this is all because of that additional quantitative easing that's been coming from the fed, they call it qe-3, qe infinity, take a look at oil prices. up above $100. that's the highest level since may 4th of this year. >> you have to trademark that qe infinity line. >> i just tweeted it. >> make some t-shirts. >> you should call it to infinity and beyond. bring in buzz. that might have been used already. >> we have a cnbc exclusive this morning. the man who started ebay and linkedin co-founder are making a big bet on greece today. that's right, greece. ceo and co-founder of endeavor global, a nonprooft that

supports entrepreneurs in emerging markets. thank you for coming in this morning. >> great to be here. >> why in god's name if you were going to start doing business in europe would you start doing it in greece? >> let me explain what endeavor is. i k we coined the friz high impact entrepreneur to mean those with the biggest ideas, the greatest potential to create job and the ability to inspire others. so today we operate in 16 markets. we've screened 30,000 companies. selected 700 entrepreneurs from 450 companies and last year those entrepreneurs generated $5 billion in revenues and 200,000 jobs. >> so you have go where the problem is. >> so i got a call from a greece business leader saying can you take entefr's business model to greece. and i thought this is the perfect time when economy is turned down, entrepreneurs look up. half the fortune 500 companies in the u.s. were founded in downtu downturns. this is the best time for entrepreneurs in greece.

>> so how much does this cost you, how much do you have to invest? >> so we raised $3 million from the private sector to support especially did he eve endefinit endefiniter endeavor's operation. this week another can aboinvest turkey. >> so if you were lucky enough to be watching us in greece, what are they supposed for do? >> first of all, chaos is your friend. and crazy a compliment. endeavor knows all the common problems startups make. we've created something called the endeavor aid to address this list of common problems. and so what i would say is number one get yourself a mentor. join endeavor's selection process. >> and that's my question. how do they find you? now that you're in greece, are you setting up a headquarters in

greece? >> we have a board of some of the top business leaders from all the haveindustries. we have a manage director that co-authored greece ten years from thousand. so if you're apentrepreneur in greece, endeavor is there to support you. >> is greece different, though? it's not the same as trying to do business in the united states. there's a whole different setup, all kinds of complications before. >> one of the reasons we started endeavor in the emerging markets is there is a fear of failure. if you're an entrepreneur, there's no smart capital. you can't get support for your crazy idea. there is no support network, no ecosystem of entrepreneurs. but what we found is that it only take as few of these entrepreneurs, they end up not only creating jobs and revenues like one of our top companies listed on the nasdaq, now $3 billion market cap, they invest

in scores of entrepreneurs, created this -- >> i wish we had more time. there's an organization in the united states that goes in to the inner citieses to try to inspire entrepreneurship. and my question, you're not nonprofit. but do you see has to sort of negative -- right now trying to earn a profit, it's got this negative connotation to it. all entrepreneurs need to have a profit incentive, right? >> absolutely. >> does it frustrate you that profit is a dirty word? >> we've screened hundreds of thousands of entrepreneurs. 5% of entrepreneurs generate two-thirds of the jobs and revenues. this is high impact entrepreneurs. we need that here in the united states, too. we have to get our mojo back. >> we have to leave it there. congratulations. we wish you lots of luck. >> watch the space, entrepreneurs in greece. >> well. joe. coming up, bart chilton has

september a letter to ben bernanke, and we'll see the note even before he does. best and worst cities for travel taxes revealed. here's today's road warrior report. business travelers visiting the windy city will be hit by a storm of taxes. that's according to a brand new study released by the global business travel association. they claim chicago hits u.s. travelers the hardest when you combine sales and travel taxes to the tune of more than $40 per day. on average that's 81% higher than ft. lauderdale, florida, has has the lowest tax burden of just over $22 per day. the chicago convention and tourism bureau didn't respond to our request for comment. see the full list of the best and worst cities for travel taxes at road warrior.cnbc.com

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. welcome back to squawk box here on cnbc. our custom stupid song for ben bernanke. i'm joe kernen along with becky quick and andrew ross sorkin. our top story today, global markets. dow closing yesterday at its highest level since december of

2007. start of the so-called great recession and risk is back in play. you've noticed that sorkin has not brought up my 30% forecast if what the s&p would do this year. he only brings it up when the market goes down. >> hold on. you get bernanke to do all this stuff for you and then you come on television and tell everybody it's such a bad idea. >> you know i can't call him, but there is somebody who can. someone who doesn't have to feel bad about his hair when he's talking to bernanke. >> this guy? >> no, bart would feel bad about his hair. but steve and bernanke, they go to those meetings, those folically challenged -- whatever. global stocks and commodities are rallying. primary driver of the fed, the central bank pledging to spend $40 billion a month. i can say it so easily. multiply it by 12. half a trillion.

>> i broke it down per person per month. >> that will add up, though. >> 133ed per person per month. you add that to the $150 per person from operation twist. >> anyway, they'll buy mortgage bondses for as long as it's deemed necessary. and it's not debt. it's not like what we talk about with debt, but when we do say $16 trillion or $17 trillion, it's half a trillion a year. not debt, not the same thing, but just in terms of numbers. >> look at the euro if you don't believe it. >> and it's not because he said romney will fire him and he wants us to keep doing this. >> because you need to get to 30% at the end of the year. >> do i believe that he honestly is looking at the mandate and takes it very seriously. >> bart can talk about that in a second unlesses he has an umbrella that has a tip that has

like poison in it. he looks like the james bond guy, doesn't he some we'? we'll get to him -- hes has the eyes that the one by had. >> all the important things for a financial regulator. >> yeah, right. the fed, if you don't know by now, plans to keep short term interest rates at record lows through mid 2015, so they'll reshoot that allied commercial where the economist can't tell you where cds are in two years because now he can tell you. >> i'd like us to reshoot it. >> yeah, we should. he says, no, he didn't -- this was before the news came out. six months longer than previously planned. bernanke did speak to the financial press yesterday. here's what he said. >> this is a main street policy because what we're about here is trying to get jobs going. trying to create more employment. trying to meet our maximum employment mandate. so that's the objective. >> when the fed chairman arrives in his office this morning, he will receive a letter from bart

chilton who we told you is onset with us. this letter warns about a potential gaping loophole in the volcker rule and joining us first on cnbc with the details is the man himself. bart, thanks for coming in. >> good to be with you? >> the let ser aboter is about volcker rule and your currents about prop trading. >> the comment period on the volcker rule that would prohibit proprietary trading, trading for the house to the banks, was done in february. so it's it time we can get on with it, so, one, we should do if soon. and, two, we should make it strong. the rule. tone sure that will isn't some supersized loophole. and it really should be clear and concise and common sense to reflect what the banks are actually doing so that they can trade the proprietary risk, but at the same time, they don't go over that line and to speculating which is what we've seen and what andrew wrote about for so many years. and didn't work out so hot. >> your problem with the law is

that it does allow for hedging. >> i'm okay if they hedge their risks. but there's a thin line between hedging and speculating. so you menlg your risks, if that over time, if that hedging of your risk continues to result in large profits like you're making a lot more money than the risks that you're losing, then you have to say there's a presumption that they're willful and trying to be evasive. but we do need to make sure that they can hedge their business risks. it's just not going crazy and going out and betting against their customers like we've seen where they set up these fake outfunds where they populate the funds with their own customers and then take the opposite position to their own customers. >> part of the thing that you've laid out is some stringent rules for what will and won't be allowed. why don't you explain those. >> the volcker rule when it's implemented needs to have a nuance view here so that when

the bank lays off a risk, it's not just one for one. they take on a risk and someone imagine he cannily has this other risk. they have a complex portfolio of a myriad of things that they're trying to hedge. that's okay. banking is complicated. the problem is making sure that they don't continually create all these profits -- >> one of your points is that entities claiming an exemption for hedging should be required to disclose to regulators their risk models to ensure that calculations are appropriately calibrated, they have to get an exemption to be allowed to do these things and it just sounds like that it would make it so complicated to even hedge your risks that you would be potentially inserting more risks back into the banks. if i can't properly hedge for every loan that i'm putting out, because a bank when it makes a lot of loans is a big risk if the economy turns down. if i have to get an exemption, it sounds like there's a lot of regulation. >> it would be a blanket

exemption. the rule provides for the exemption. what i'm saying is that it's a nuance view. i think the bank should actually like this because i understand that it's not a one for one, you know, risk based upon their hedge. their hedge for the risk. the problem is just making sure that it's not speculative. we've seen the problems. >> but if i'm bank x, citi or jp or whomever and i bring you my model, do you feel equipped to be able to understand my model and decide that my model is accurate and will work and then what happens if a year later it just so happens thats model hasn't worked and by the way has been blessed by regulators? >> we're not going to approve a model. i'm not suggesting that. i don't want to micro manage. we're really looking at long term what happens. so, again, i'm not as concerned if something happens in the market and they make money on one trade or even -- it's over time if they do that. that will be the problem. we want to ensure that they

tonight get don't bet against their customers and don't just put their money in the darkest corners of the financial market. >> i don't want to be cynical, but the last thing, you were going to get the nasty speculators running the oil markets up. and now one fell swoop with ben bernanke and we're over 100 bucks. what are you going to do to him, is he in trouble? does he have too many contracts and treasury bonds? >> markets react -- >> you don't care about that but the nasty oil speculators -- >> markets move all the time. >> speculate tors in oil didn't push us over 100, did they? >> we're looking at markets all the time, but the markets react to -- >> you better go after bernanke. >> i don't have any problem with markets go up and down. it's when they go up and down with lots of volatility when there's no supply and demand fundamentals. >> what we've seen in the last three months with qe-3 coming and now it's been announced. >> i'm not sure that's what i've

described. what i look at is large traders who have so much influence that they can push prices around. >> there's the -- so you're talking about the fed. >> i'm not talking about the fed thousa now. >> they can control 60 respect about of the market. you didn't want people controlling 10%. if anyone pushed oil up, it's the fed. >> i'm going to start with the guys who i have jurisdiction over and see how that works. >> the little nice running around between the elephants. >> no, we're talking about the biggest banks in the world. but once we have some view as to what's going on and position limits for those guy, then we'll hire you and you can come down and regulate the fed. >> let me put some position lipts lip limits on the fed. >> i got an extra office. >> do i have to grow my hair like that? >> we'll offset each other. >> all right. >> bart, we want to thank you very much for coming in. >> you're the only regulator that has a theme song that comes in here.

>> the james bond? >> yeah, you're the only one -- >> oh, great. i'll put it on my ring tone. >> planning any other die bolic cal schemes? >> we're here to help. >> keep us up-to-date. coming up, gold soaring to levels not seen since february. i don't know wiho you want to blame for that. risk is the name of the game. we'll ask where you should be putting your money.

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we're talking about the fed induced rally this morning. joining us now, chief economist,

and ira harris. martin, i need to start with you. let's focus on your expertise and that is gold. part of your continuing bullishness, did it have to do where what we saw yesterday? you certainly were rewarded with being long down in when it got back down into the high 1500s. did you think qe-3 would boost the price? >> yes, i did. and of course what happened yesterday was absolutely in line with our bullish gold story. i could probably characterize the gold market this year in terms of two dates. one february 29th when draghi said there would be no more ltro, and on the same day, the fed and ben bernanke implied that qe-3 was off the table. because we had a little bit better economic data. so the gold market really sold off since then and then the second date would be july 26th that came with draghi's speech

which is we'll do whatever it takes. and since then, we've had comments both from draghi of course and from ben bernanke that were very supportive of more qe. and so we've had an upswing in the gold price since then. yesterday's thing is what i would call ben bernanke's we'll do whatever it takes. >> i agree. if we can -- cause and effect is always tenuous. but if we can attribute the rise in gold to qe-3, is there any reason to stop at gold and not talk about oil and even other commodities down the food chain? is there any reason to say that's not qe three c echle-qe-? >> of course the other commodities have an industrial component and what we need is an industrial upswing to really get copper and oil and so going. gold reacts very quickly to the monetary side. >> you're saying we need something to get oil going? we're over 100. oil's already gone, gone, gone.

>> i would not put the oil price directly on to qe-3. there's other factors going on in the oil market. >> they said there's slack demand and plenty of supply. the ia said that earlier this week. >> well, yes, but there's a lot of concern as you know about potential disruptions. >> well, as a canadian, either way, you're making money hand over fist in gold and making a lot of money in your oil, too. that's why you're smiling. look at you, you can't rake it in quick enough. ira, what do you think? >> everything you said is a home run, but steve liesman asked the best question yesterday. >> really? >> yes, he did. for me to say that, that's how right on that was. but i would ask another question, joe, and this is -- >> wait, what was the question, the inflation one? >> yes, the reaction function to the inflation. because that painted it into that that was a woodford nominal gdp or charles evans on the

issue that we'll keep monetary policy until we get to 7% unemployment and 3% inflation. but to segue from you picking on bald headed people this morning, i'm going to pick on the m.i.t. crowd because you went to m.i.t. and had a laboratory to work in. the m.i.t. crowd from bernanke to draghi have taken monetary policy and turned it into laboratory for academic theory tisch shans. they're uncertain. as he just previously said, february 29th. so now we're dealing in a world with a lot of theoretical possibilities and very few certainties. >> i agree with you completely. i called you quasi bald. economics is a pseudo science. martin, i want to have you back at shall point to talk more

about gold, too p. eye remark the theoretical sciences, they just don't. once you get past chemistry and -- >> when we were this school, we called that let's assume we have a can opener. and you'll understand what that means. >> exactly. >> when we come back, we'll talk about kicking the can again. the house approved a stop gap measure to if you said the government for six more months. we will ask if a permanent solution is ever possible. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade.

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oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. now save 50% on banners. they agreed to increase the policy of accommodation by increasing additional agency-backed mortgage securities. >> our powers showed 90% probability of this happening. >> investors are reacting. >> the idea is to help the economy grow quickly enough to generate new jobs.

>> does that mean your tolerance for inflation will be higher in coming years? >> a gain of about 200 points for the dow industrial average. a five-year high. >> with the election right around the corner, the debt ceiling is coming back into play. we love that. and bigger and better than ever ever. david swicker joins us this morning we don't know, congressman, what should the average person be talking about? the debt ceiling or the fiscal cliff? we can rub both of them all over our bodies, right, to worry? >> right. and you were doing a great job on what the fed has done and i'm visualizing a toy story character, to infinity and beyond, your conversation. >> when mark faber said qe12, qe13, qe14. we all laughed. it scared us, but we didn't believe it. this counts for more than qe3. the fed did plenty.

nobody didn't think this was shock and awe, was there? >> with the ecb statements and what bernanke has done, saying this will be perpetual. and what many have been watching currencies, and oil prices and you overlay that with our fiscal cliff, the sequestration, where we'll go budgetwise, the level of uncertainty is driving the market. >> my point was, okay, and i kind of blame you guys, congress. they have a dual mandate. you should change that, number one, if you really don't like what they are having. perfectly justified with unemployment is, perfectly justified and this is part of their -- what they are supposed to be doing and as far as the other mandate, which is price stability, all of the evidence on their side right now, that things are under control i mean down the road. raw commodities going up. you are not seeing inflationary

spirals, i liken it to you think you are flying when you jump off a 100-story building until you hit the pavement. bond vigilantes right around the corner. but the fed has a lot of cover. >> not the flying, the sudden stop that hurts. >> the pavement. i know. >> you hit a brilliant point. ultimately, the fed is a creations of congress. it's congress' responsibility. that's one of the great arguments we have, particularly in the financial services committee, it's the dual mandate rational? should it be dealing with inflation, should it be dealing with employment? dealing with both, do you end up with cross purposes? >> meaning are you sitting around the table talking about changing the dual mandate? >> i don't think it's rising to the level of where someone is willing to deal with it. >> congress would have the power to go ahead and change that? >> sure. the fed is ultimately a creation

of congress. >> would yyou would have to pas something to do that. >> and there you hit the rub. when you look at what we end up doing with the budget, at least in today's congress, republican-controlled senate, democrat controlled house, and god forbid we get the senate to actually do its work, we end up continuing to do these continuing resolutions or this patchwork pushing the can down the road, because we don't seem to have a partner in negotiation. >> no way the president would sign that either. >> it's -- you know, i also -- take all the help you can get with job creation. >> very true. >> all right, don't look for that any time soon. how about -- let me ask you this as a guy in congress. we're going to have chuck todd on, romney not doing so well in some of the swing states. i don't know how to look at that only one poll that matters. and we have debates to go, all this stuff between now and the

election. let's say that the president is re-elected. is it possible that he trian lates. do you feel he could work with you and you could work with him? >> this president isn't bill clinton. >> only one bill clinton. but could he trianlate at all? >> he could. but when you look at the people he surrounded himself with, in my view, they are the left of the left in political leadership. my greater fear, he gets re-elected and goes further to the left and we've seen the disaster that's been economically over the past couple of years. >> that just means nothing happens. >> you could have the senate and the house -- >> if the republicans have the senate and the house -- >> in many ways, it's up to the voters on what they want the vision of the country to be. >> when we come back on a squawk," kevin watch wilsh withr the rest of the morning. stick around.

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what we're about here, trying to get jobs going. >> big ben giving a boost to wall street. could the fed's latest move be a shot in the arm for job growth? we spell out what this means for your money. >> your money, your vote. >> nbc news chief correspondent chuck todd joins us to talk presidential politics and unveiling a brand new electoral map, first on cnbc. >> and more on michelle's sitdown with jean claude trichet. >> we can't let the rest of the world finance us determine if we spend more. as simple as that. >> a second hour of "squawk box"

begins right now. good morning. walk to "quasquawk box." there is one story everybody is talking about this morning. a fed induced spark to the markets so get your rally caps ready. dough closing highest since december 2007, the squalled sta squalled staso called start of the great recession. ben bernanke giving shoths stocks a shot in the arm. the central bank pledging to spend $40 billion to buy mortgage bonds for as long as it sdeemz necessary. and more measures could be on the table. ben bernanke speaking to the financial press yesterday. >> as inflation goes above the target level as we talked about

in january, you take a balanced approach. we bring inflation back to the target over time in a way that takes into account the deviations of both of our objectives from their targets. >> we'll talk about the fed all morning and asking what's next. our news maiker this hour, former fed governor kevin warsh, once bernanke's right hand and a lot of insight what's going on. right-hand man joe wants me to say. michelle caruso-cabrera sat down with jean claude trichet. and then the economy and politics, our special guest at 8:00 eastern, former new york city mayor and now romney supporter, rudy giuliani. let's get up to speed on this morning's headlines. becky has that for us. >> on this day after the fed's latest economy boosting moves, a plethora of fresh economic numbers due out this morning,

including retail sales, consumer prices, industrial production, consumer sentiment and business inventories, a lot to focus on. and the european debt crisis in focus as european finance ministers meet in cyprus. ministers try to assess how much help spain will need. and consumers can preorder apple's new iphone5 as of this morning. online orders appear to be go g smoothly. the futures this morning are indicated higher this comes after these big gains we saw yesterday. dow futures up 48 points above fair value. and s & p up five points above. and you can tie it all back to qe3. whatever you want to call it. another big asset buying move to help boost the economy and lower u.s. employment. >> in determining the size, pace, and composition of any

additional asset purchase, we will, as always, take appropriate account of the inflation outlook and efficacy and costs. additionally, the committee emphasizes, it expects a highly accommodative stance for a considerable time after the economic recovery strengthens. >> so what does this mean for your money and the markets? joining us for the next hour, our guest host to talk about this, kevin warsh, a former fed governor, he is a lecturer at stanford school of business. we are excited for you to be here. we have been waiting for you to come on. after we heard from the fed yesterday, we are trying to figure out what this means. >> thank you for having me. first time caller, long-time viewer. >> what do you think about qe3? >> ben bernanke is a model man and yesterday's move was an immodest move. aed monthest man with an immodest mission, and putting

all of his chips on the additional. >> all in, right? >> it's all in. an aggressive move. it reminds me of a degree of aggressiveness that the fed had to show in the deepest, darkest days in the financial crisis, in the panic. we haven't been in a panic in a long time. a subopt imimal recovery. but the fed revealed they are really worried about the state of the economy. they revealed a concern that markets are unsure and they decided to go big. >> to they know something we don't? or are they just worried? ben bernanke is a historian. is this a reflection of looking back at the great depression? or do they know something we don't know? >> the fed doesn't know much more than every other participant in the market. in ben bernanke's seal at the fed is anything, he tries to pull back the curtain. i don't mean to suggest that he

knows about the great shocks of the economy, but i suspect they concluded that the economy is at stall speed or worse. the global economy is weakening, the developments out of europe, they might be dealing with some of the tail risks, europe is in the early innings of a serious recession. even if they were to solve spain italy overnight, the pullback in credit has to be concerning the federal reserve, weaknesses in asia must be too. and my sense, the chair and his colleague said they shouldn't wait any longer before going big. >> what concerns me, i was expecting something yesterday. the market had been primed for that. what concerns me this is tied directly to the unemployment rate at this point. we will keep doing this indefinitely until the unemployment rate comes down. we could see it get worse before it gets better. a lot of other factors that have influence over that. what do you think about tieing it directly to unemployment?

>> the goal is to fork tuesdcus the labor markets. what concerns me most about it, in my view, the fed can't do much more to lower the unemployment rate. the fed is rightly dissatisfied. but the iphone 5 is going to do more for the real economy that qe3. i worry a lot about efficacy or i worry about the reserve accommodating other policies. my feeling, ben and his colleagues at the fed don't expect much support from a trade policy that would be more growth oriented and fiscal policies that are more longer term. they are trying to compensate for these other failings and my own sense, they could be overpromising and underdelivering. but it comes from a good place. >> but if nothing bad happened, you figure why not do it? but that begs the question. can something bad happen from this? this is not stimulus this is not

blowing $800 billion in a stimulus program. they can shrink the balance sheet. they can pull it back in, right? are they skillful enough to do it without causing adverse effects? >> joe, there is a reason exit is a four-letter word. it's very difficult. exiting from monetary policy is typically difficult. the history of central banks is getting out is harder than getting in. >> they must think that the benefits outweigh the risk. they must think that. >> benefits are really difficult. >> here is the best way i can capture where i suspect the chair is, and i'll give you my own view. he think there are some benefits and we better grab them while we can, to try to strengthen the economy before it loses any more momentum and as he said in jackson hole, he thinks these costs are highly manageable. my own view, the benefits are n

small. the risks to the exit have to be higher, and the risks in washington are real too. and i don'tean the political risks. what i mean is if the federal reserve is now in the business of trying to pull a rabbit out of the hat every time the economy loses control, then the rest of washington can say, well, there's not much we need to do or can do, because ben bernanke has my back. i don't think that's his intent this is a dynamic game. >> it's a moral hazard. >> almost likebazooka. >> i have to believe this conversation are you having with us, have you had at some time you were give nor with ben bernanke, what does he tell you when you espouse this view? >> so ben is a decent honorable man, incredible public servant and genuinely concerned about the state of the economy.

the principal differences between us when we have these discussions a ranking of the benefits and the costs. and as least as important, andrew, is the institutional roles. we have a powerful printing press, powerful institutional credibility, but our role is frankly a narrow role. and the rolex pand only if you're in a financial crisis. so if you're in a panic where the federal reserve was created to respond to the panic of 1907, those rules might get wider. we're not in a panic. we're in a lousy recovery, there is a ton washington can do. i suspect what he would have said back then and my say to colleague who are pushing back, if we don't move now, who will? we shouldn't burden the hard-working american workers trying to get back to work by us staying in a narrow role. it's an institutional role and responsibility question that divides us. >> what do you want washington to do? more of a get out of the way and deal with our long-term entitled

issues and debt? or are you a pass the american jobs act is what they should do? what do you mean? what would help? >> for four or five years, going back across administrations, washington has been in the business of solving for the next quarter. maybe even solving for the next election. we spent 5 trillion trying to turbo charge the economy. we've wen running the stimulus program after stimulus program, and gdp can look better next quarter. we've been running these programs like an infomercial. buy this car in the next 30 minutes, we will throw in this house too. hire this worker, that's great. but you have to do it by the end of december. this type of short-term policy has not serbed us well, and i dent think it's served our politicians well either. imagine four or five years ago, imagine we said there is not much we can do, after we emerg d

from the financial panic. >> they said these were all long-term things. >> the private sector is much better at asset allocation i'm afraid than the government is. i'm -- >> are you writing it down? say that again. the private sector is much better at asset allocation. are you sure? what if you get the smartest guys. pick the smartest guys to decide? that's what the president does. he picks the smartest guys. >> i would say that the -- >> writing it down. >> the economics departments from the finest universities. my old economics department at stanford university, there is a lot of talent there. they don't know which way capital should go, where the markets will be. the reason we're having reblg eem change is not because of energy bill, it's because of

technology, labor and great minds that come up with it. remember years and years ago, congress would pass crime bills every year and crime would go up. congress hasn't passed a crime bill for a long time. crime keeps going down. >> the $2 btu, for natural gas, they didn't think about that when we were deciding on all that solar stuff i guess that came out of nowhere. really put a crimp in things many. >> you must be thrilled that congress is saying let's kick the can down the road six months more? >> we're getting closer and closer by running these myopic policies to a tipping point. we have an opportunity to fix these things, to fundamentally reform tax code to have a trade agenda that is open, but i would say if we continue these policies of saying how do we make the next quarter better, how do we make the stock market go up today, we will run the risk. at core, i would say, beksy, central banks in the business of

buying time. they can buy time for the rest of wall street can gelt back in the grove. what you heard yesterday is a central bank that says we'll buy time for a very long time, which case it's not obvious you are corroding in other policymakers. more obvious you are crowding them out. >> what do you see as the tipping point? in your scenario? >> none of us know. i dent know. i would say if we continue the policies we've been going down, then it would be -- it would be taking risks we need not take as a country to get to 2016. >> a percentage of gdp. some sense in your mind, two, throw years from now, six months from now. the time frame where we have a problem. confidence gets sucked out of the market all over again. >> core, that policymakers need to be humble and quite the contradiction. with policymakers should we

humble, and debt to gdp ratio will do it. the trigger, catalyst, one we can't anticipate and if you look at the markets now. asset prices continue to melt up. where asset prices are driven less by fundamentals and more by speeches and policies coming out of washington, you're taking these risks. risks are highest in the economy when measures of risk are he willest. and when i look at the vix at this level and you compare that to the headlines you read every morning, they certainly don't seem in sync, and that's exactly when shocks happen. >> kevin, lucky enough to have you here for the rest of the hour. a will the more to talk about. again, former federal reserve governor kevin warsh, here with us until 8:00 eastern time. a lot more to ask. >> those guys are glad he's gone. 11-1. so he's very per persuasive, ben.

>> we were doing so well heading to break. >> the chairman can get done what he wants. i take it we're on break. >> not yet. >> joe tries to get me to reveal. >> i'll read this now. up next, a rare interview with jean claude trichet. michelle caruso-cabrera sitting down with former ecb president. what surprised you the most, after this. >> what surprised me the most, joe, is what he said about bank investors. he says in the future, bank investors should suffer far more than they have during this financial crisis. more on that when we come back. "squawk box" right back after this break. ♪ i can do anything today ♪ i can go anywhere ♪ i can go anywhere today ♪ la la la la la la la [ male announcer ] dow solutions help millions of people by helping to make gluten free bread that doesn't taste gluten free.

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good morning, welcome back to "skwauks box." watching the global markets after yesterday's big fed-induced rally. dow up 200 points, up 1.5%. this morning, you'll see futures continue to climb. dow futures up by 50 points, and oil prices, other commodities on the climb. right now, oil prices above $100. $10 $100.15. up 1.8%. gold prices at six-month highs last i checked. up another $5, $1,177 ab ounce. all these actions moved by fed action.

>> and mara draghi says europe seeing positive results from the central bank's bond buy program. and good morning michelle. >> good morning, andrew. jean claude trichet very supportive of draghi's program they announced. it's not that surprising he would be supportive of his successor. what is far more interesting what he said about the holders of senior debt in banks. up until now, they have never suffered during the european crisis. in fact, jean claude trichet was insistent they did not suffer, do not suffer. ireland wanted to impose losses on the holders of one of the senior banks, and trichet said are you not going to do that ask and the company sought a

bailout. now trichet said things should be different in the future. >> it depends on your own judgment. in the heat of the crisis, and what would be the new permanent regime in normal times. permanent regime in normal times, absolutely no doubt you have all of the risks that have been taken transformed if it is the case, losses. that's normal. we should not have permanent regime in the future where you would have to be too big to fail, too complex to fail. that's over. that should be over. now, if you are still coping with a dramatic crisis this is another story, and you have to make a judgment. >> so to paraphrase what you just said, i want to be clear. once the crisis is over and there is a new banking regime it should be okay for senior debt

holders to take a hit? you didn't want that to happen in ireland in the midst of the crisis? >> yes. you have to make a clear difference and look at the consequences taking into account the overall situation. >> greek creditors, a lot of greek creditors who lost money and took a hit during restructuring are angry with the ecb. you bought the same bonds, you didn't take it as a hit. they see it as a violation of contracts. a lack of respect for property rights is that accurate way to look at it? >> i don't think so. had the ecb not been there in any case, they would have lost much, much more. no doubt of that. in terms of the question is it fair or not, there is absolutely no doubt. on the other hahn, the ecb has the taxpayers' money and has to be keen on defending interest of the taxpayers.

>> he says -- and i followed up again, in terms of the spirit of violation of law, he says absolutely not. he totally disagreed with that assessment. back to you. >> michelle, stay here for a minute. guest host today is kevin warsh, former federal reserve governor. kevin, you know trichet. how is the bank similar or different in the two regimes. >> jean claude looks better. much more relaxed. and put his burdens on other people. i would say in some sense that mario draghi has a tougher job today than ben bernanke and in some sense, what he's announced recently is really the next version. version 2.0 of securities market program that jean claude put into practice. they are in the business of qe. but qe for them is in some sense even riskier, they are not buying the bonds of france and

germany at this point. they are buying the bonds or threatening to in spain italy. so the path, change in leadership between them has been revolutionary. and all of them, jean claude and mario both, doing the best to keep that european experiment together, even if it's sacrificing growth. >> we'll continue the conversation in a moment with kevin warsh. more from michelle later in the morning too. stick around. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone.

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. welcome back to "squawk box," everyone. note al qae notable market moves. oil risen above $100 for the first time since may 4th. gold, highest level since february 29th. and the dollar has hit a four-month low against the euro. $1.30 is where the euro is trading. and several private equity firms are interested in taking staples private. staples shares lost a quarter of their value over the last six months, and the s.e.c. has ended

a probe of avon products without taking any action. they were looking into whether a former executive revealed information on a bribery probe. >> can i call you kevin? or should i call you governor? >> call me anything you want. >> bernanke has done some things with which a fed chairman is designed to do. is this a transformative fed chairmanship? would you liken it to -- who was the last guy to do this, was it volcker? they transformed it in the opposite direction. >> volcker, bernanke, had a lot of guts. what bernanke did was gutsy. and volcker had a lot of guts. to be this aggressive requires guts. >> mutually exclusive?

did that end the volcker sort of way to run the fed? did that end yesterday? >> so i don't think that ben believes in his own framework that he is unleashed inflation, and if we were to have inflation racing against him, he would have to take action, and the consequences of markets would be what they are he doesn't think it's going to happen. what i would say, you need guts on both sides. gutsy on great financial panic as he and colleagues, don koehn and myself, gutsy. this is a regime that demanded aggressiveness. we're just in a lousy recovery now and treating it like it's a great financial panic and not thinking about what are the consequences and challenges. i want the gutsiness on that side too. >> if they don't do this they will look back and say he could have done this. this opens up a whole new -- for what the fed chairman is supposed to do, doesn't it? >> i would say that the federal

reserve has been moving beyond its traditional remit, still perhaps within the four walls of the statute, but outside the remit quite a while. and his successor will have to confront the policies and he his colleagues put in place yesterday. and it will be very difficult. if his instincts and views on the economy are much like ben's, maybe this policy can work on autopilot. but if someone shows up at the beginning of the next federal reserve chair's term with a very different role of the fed, he will have this qe program forever put in place and have to wrestle with it. explain it to markets and re-establish a new framework. i think his successor will have real challenges, not the least of which is an economy.

>> ron paul will change a few things. if it were, it might be different? >> personnel is policy. the next president will have a huge impact on whether these policies will continue for as long as the fed said they would yesterday. >> do you think when he has institutionalized these policies, which will go on two or three years, he expects to be there in two or three years s roll them back? >> i would be very surprised if ben bernanke signed up, if a president were willing for another term. i think he served with dedication, with incredible long hours, incredible duty, and as soon as he can get back to princeton, i suspect he goes. >> kevin, you laid out this idea of the difficult job his successor will have. and what surprised me the most if you look over the last year and a half or so, of the fed, is that they have put themselves into more and more corners.

they have taken things that used to be -- you can interpret it a few different ways and laid it out. part of that is transparency for the markets, but part of the also boxes you in. again, i go back to yesterday with tieing this directly to unemployment. what happens if unemployment doesn't come down and you decide it's not working? how do you change those policies, because you've laid it out in such a way, and i realize the promise to keep interest rates low to 2015 is tied to what the economy is going, but it seems like they have put themselves into so many more specific boxes on things that used to be open to interpretation. >> i would say a few things. one, to the extent that they have constrained their choices, it's because they are worried about what they see. if they believe the economy and prospects were moving even slowly to a higher path, i don't think they would have decided to be nearly as aggressive. second secondly, i would say that framework that the chair tried to lay out yesterday is a

framework where instead of an on/off switch, like qe1, qe2, i'm turning it on, you'll see when the light switch is going off. i would describe it as a dimmer switch. what he said is a dimmer light and what he described, he can be reactive to the environment. as the environment changes, so will the dimmer. what i thought i heard from him in his press conference, that dimmer switch is almost ainsureedly going in one direction. we start with a base of purchases, $85 billion, the rest of the month. we start with $40 billion, $45 billion. but if we breach the fiscal cliff, he says i've got your back. i won't be able to protect the economy entirely, but there is something i can do there. so the question really for his successor will be what's he going to do with the dimmer switch? will he show it can move in both

directions? the reason why the chair was forward leaning on the policy throughout the statement, he's trying to capitalize the benefits of all of that today. that's why the stock market moves up, that's why gold prices are moving up, oil is moving up. he thinks this economy needs a tremendous boost, and he thinks ki deliver it. >> i ransom numbers on it today. the fed balance sheet increased $2 trillion since the program began. close to 7,000 for every single man, woman and child in this country. and the other $250 per month for every one of those people too. when go you get to the point where you think, holy cow. how do we unwind this, and when? >> i don't like the bang for the buck. i'm not persuaded by the efficacy. i think there are people out there, perhaps even of prevailing opinion in washington, who think the balance sheet can grow another

$3 trillion to $5 trillion to bring us to optimal policy. the reason i don't believe much of that, who are we buying this debt from? last year, the federal reserve bought 77% of all of the debt that tim gheitner issues. it doesn't mean that the federal government doesn't have an important role to play. but our largest buyers of securities, domestically and overseas, they aren't fooled. but the best best is that the u.s. will ultimately figure this out. we will ultimately get this right. and the bet that the u.s. will chronically outperform the trading partners the next five to ten years is the right bet. i don't think we're making all of the right moves, but i think we'll figure it out. despite the best eithfforts to l

the economy, we are still growing at 1.75%. that's not bad, given we have such growth defeating fiscal poef and regulatory policy. monetary policy the way we've described. if the policies were a little less growth defeating, we would be growing more than anyone else in the world and the valuations in asset prices could be justified. >> yeveryone else said 1.5% to 2%. you said 1.5% to 1.75%. >> i don't think this looks as good as the first half. >> we'll get more. coming up, nbc political director chuck todd will join us on next with a very new electoral map. and find out why "squawk" regulars are having breakfast together in new york this morning.

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welcome back. chuck todd is out with his new electoral map. chuck, it's important, big news. i asked becky if i can kid around with you for a second. i have to start with the granholm dating game video i just saw on youtube. have you seen this? i am scarred for life. >> i have back in the day. "dating game." didn't we have tom selleck, jennifer granholm. another politician had another dating game -- >> she looks like farrah faucet. i have to ask todd about that. that's why she was born in

canada. if she was born in america, she might have been on the ticket in '08. >> a star back then and saw her at the dnc. saw you last night as i do every night with brian this is different. what are you talking about this morning, right? >> it is. but i do have one little complaint, joe. i believe you have been hosting this show with becky and andrew for a long time. not a short amount of time. becky is on my show almost every day. you know who the first person to invite me on your show? you, joe. >> you were with us not too long ago. >> i believe it was 2009. but that's okay. that's not too long ago. that's cool. >> would you get up early with us every morning? would do you that? >> whoa. >> it's a little late, chuck, isn't it? >> election season, 50 days left. if you would show up every day, would be so pleased.

you are my favorite. >> here is what we have. i'll do this a lot. >> he has all of these calls to make. >> "today" show, "morning joe." >> political reporting is hard. chuck, i got this thing -- you can't believe these tabloids, can you? you called the white house to get comment on it. >> the british tabloids, always got to be careful. i'll be honest, i get confused which one of them do actual reporting, which of them don't. this story making the rounds. did the white house get intelligence beforehand, before libya. >> and not considered a tabloid. >> naked women anywhere? >> no naked women. >> not any of the naked women things, that's why you never know for sure. a lot of disputes about the libya thing. we've been reporting that it was a coordinated attack, some sort of planning involved that was beyond sort of just the protests

and a spontaneous -- but the white house is denying it. they say all of the intelligence they have been seeing indicates this was more of a spontaneous attack, that organically developed during the protest and not something that was premeditat premeditated. >> but as you point out, you figure you are going to be ready on september 11th anyway. and that's the question. on september 11th, on any anniversary, you figure you will take extraordinary measures anyway, right? >> look, that's one of the questions for the administration, both the state department and white house, which is on september 10th, they said they had taken additional steps to protect americans abroad. and the question is, okay, what happened in libya? what was going on there? there may be an indication that there was an infiltrator and there was nothing they could have done about this. but there are some questions that the administration does need to account for.

>> we'll finally get to your -- you have to be ready for everything when you come on. >> i know. i've learned. >> "dating game," everything. >> we are doing battlegrounds every week, and all of the polls were conducted sunday through tuesday, and you could -- you can say it's -- part of the convention bump, but they all tell the same story, which is the president has a small, but looks like solid lead in all three statements, virgins, virg florida. and listed at 43 or 44 in all three states. what was unifingly interesting in all three, the direction of the country question. are we on the right track? or going in the wrong direction? in all three states, since we've been polling them, the number above 40% of voters believing we're headed down the right track. we've seen this in the national

poll. this was the biggest part of the national convention. >> bill clinton -- >> he gave this speech that made the point, we are on the right traction. the theme, it's paying dividends in the short term. >> i was going to say two words, bill clinton. i love him. you know, having watched this, i wish we had more time. when i'm watching him on "nightly" every night, i have all of these questions i want to ask you, polling. is polling better than it used to be, chuck? do you remember the dukakis? >> honestly? >> you remember dukakis up 17. gallup had mondale up. you look at this, and you have to wait until november 6 to get the real poll. >> there is a dmocommon

denominator, and that's always comes up with gallup. gallup has shown funny things in september every four years. >> rasmussen is the outliar now, chuck. >> it waits by party. something that other polls don't -- i'm going to steal a line from charlie cook. a political analyst, he says technology has done a lot of things. technology has not improved polling. >> what is the margin of error, by the way? >> ours? three points. >> statistically. >> does it matter it was september 9th through 11th, right after the democratic election? >> yes. >> the unemployment report too. the crappy employment report. >> but pre, crisis in the middle east.

>> how many days? 54. >> i think we're down to 53. look, i'm concerned about the state of polling in general. i tell you, we work really hard here. i'm confident in our poll. >> well, we'll see you on monday, because becky probably wouldn't ask about this. >> he tweeted this, and i tweeted back, he does have a slot here every day. >> 6:02, get your alarm going. >> 6:02. i don't know. is there shows on before 7:00? come on, man. you're killing me. >> at least you're on the real joe for once, we like that. >> don't get involved on that, joe. >> thank you, chuck. i'll get you involved in a little bit. rudy giuliani, coming up right after this. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything

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are investing in a staples buyout. >> interested. >> interested in a staples buyout. a big difference between the two. apple shares are rising as the company takes orders for the iphone5. up 75% over the last year. $687.70 is the last trade. gop presidential candidate mitt romney is holding a fund-raiser in new york. lots of high-profile guests and

some guests just showing up. mary thompson joins us from new york city with more. mary. >> hey there, becky. a very well-heeled crowd here for a $2,500 a head breakfast to raise money for presidential candidate mitt romney. on the guest list? bold faced names from the business community. include real estate magnate john castamatios. >> we're trying to save the soul of america. >> romney supporting john mack, former ceo of morgan stanley. >> i want to back mr. romney in this election. it's all about the economy. >> a frequent guest on "squawk box," billionaire on the guest list, one of many on the guest list today, wilber ross.

>> the unemployment figures, you see the economic figures, we need a change in management. >> and flying past us was john thain, the former ceo of new york stock exchange. he did not stop to talk to cnbc. brian cashman also in attendance. we don't have an exact number on how many people are attending the breakfast, but 3,500 people can fit into the grand ballroom at the hilton where it's being held. and some uninvite the guests, protesters chanting take the money out of politics. inside, money one of the issues, raising money once again for the republican presidential candidate mitt romney. >> you didn't see chair or scarjo, anybody like that?

>> no, i didn't. no scarjo, nothing like that. >> no chair. >> some great dresses going into that, though. >> matt damon, no? >> matt damon wasn't there. >> more of a business-oriented breakfast, joe. >> what do they know? >> you think woody allen is there. coming up, more on qe3 from our guest kevin warsh. and rudy giuliani getting ready in the squawk board room. we'll ask him to the political response of the violence in the muddle east, presidential election and new york's ban on large sugary over 16-ounce drinks.

the fed launching a fresh rounds of quantitative heeasing we'll break it down with kevin warsh. >> i worry about the federal reserve trying to compensate for the failing of other policies. and rudy giuliani weighs in on the conflict in the middle east and the presidential election. rudy giuliani, a surrogate for the romney campaign, joins us on

the set. breaking economic data. >> i don't know what we're yelling about! >> retail sales and consumer price index data at 8:30 a.m. eastern. find out if the numbers give strength to the rally or help make the bears case. >> we woke up the mama. >> third hour of "squawk box" begins right now. ♪ >> welcome back to ""squawk box our guest host this morning, hopefully you got here at 7:00, or at 6:00 really, because we were talking about the guest host before he got here, you needed to be here for that too. former fed governor kevin warsh. in addition to what we do here, europe. the central banks, they are -- they are churning it out around

the world. >> but not as quickly as we are. >> that's why the euro is back to 130. >> i was thinking of the commercial on the central banks sitting on the piles of money. and you know what? the fed just moved so far in front of the rest of them. >> think about it. greece, spain, italy, portugal. and people going, give me the euros, instead of these dollars. that's pretty sad. >> the recent history, the last five years, says when one central bank goes big, the others play catchup. we might be at the beginning of -- >> the rest of them have to say, we can't do any more in south korea. they didn't do more to help things out. maybe more of it is because of the emerging markets in asian countries get flooded with higher prices that go and effect people too. the spigot on, they can't turn it off. >> we have an integrated global economy. when the fed does this plenty of

leakage. >> leakage and shrinkage. i remember gold wouldn't go to 2,000. and now i'm wondering. because you get a ten-year bull market. 200 to 1,800, figure you've seen enough, but not when all bets are off. gold should go to $2,000 now. >> a lot of people on the gold trade betting on inflation. gold is the alternative currency. if the world central banks continue on this wave, every asset price including gold will continue to melt higher. there is a currency i want to hold. >> the currency they want to hold today is the euro over the dollar. $1.30. even as the european debt crisis unfoltds. spain's financial situation is going to be a primary topic of discussion as the ministers try to assess how much help that country is going to need. back here in the u.s., equity futures are higher again this morning, even though the dow had

such a run yesterday. this morning, looking at the dow futures up by 35 points up. lower than it had been earlier. s & p futures better by 2 579 points. dow closed since the highest level of december 2007, the start of the so-called great recession. four stocks rose for every one that fell. and global stocks and commodities also rallying today. >> the primary driver, the central bank pledging to buy mortgage bonds for as long as it sdeemz necessary. cnbc's steve weissman joins us with more. steve. >> andrew, thanks. i think it's hard to understatement what economists are calling a sea change in federal policy. one economist called it exceptionally aggressive. policy from the central reserve. to understand what ben bernanke has engineered, start with the

fixed amount. the mormon you mental change in the forward guidance. let's remind you what they said. a highly accommodative stance will be appropriate for a considerable time after the economic recovery strengthens. take a look at gdp forecast, upped in the outlying years. you can see there, so the fed said it's going to remain, and 3.4% gdp growth. that's the change, they will remain low, even while groelwth exceeds the speed limit of the economy. moving on. here is the translation of all of that, if they can just move up their idea that comes out of a paper delivered by columbia university. the idea of how the fed would act when it recovers, that's dead. we'll change the way we react and stay low. bernanke didn't answer any question directly on whether the fed will tolerate higher in

nation. bernanke declined to say that the new approach indicated a greater tolerance for actual inflation. privately, though, he would probably privately acknowledge that it implies a greater tolerance for risk. it changes infest vestment behavior to investor belief. do they believe the fed will tolerate higher in inflation? it's experimental, like almost everything else the fed has done. it's the lack of credible forward commitment that kept qe from being successful. as we go to break, i want to ask kevin warsh a question. we're in break, right, joe? >> kevin, don't listen to him. everything going good. >> steve, good to see you. >> what is the fed saying about future tolerance for inflation when you read that language? >> so i don't think the chairman considers inflation risks to be his primary concern, secondary

concern, or anything close to it. it looks to me as though he thinks he has a lot of risks that are much higher. i thought the way he answered your question yesterday, listen, we'll think semet ricly about inflation. what that means in the near term, inflation drifting above the fed's inflation target by a little bit, it won't concern him tremendously. >> but semet rickly means we've tolerated a much higher employment rate than we think is right. wouldn't they tolerate a higher in nation rate. if he doesn't do that, does that change forward guidance? is there a xhiment if he says i will tolerate higher in nation numbers? >> i don't want to be too dismissive of what the academy is teaching central banks lately. the markets don't listen so much to the words. they follow the music. and the music is that ben bernanke has continued to be aggressive. markets are paying attention to. they haven't seen inflation. markets haven't, when they see it, they will then test his

mettle or the mettle of the successor. language matters, but the big story is the story you led with. whatever it takes is the policy, even in a period of 1.75% growth. >> okay. >> can i -- can i real quickly just ask, and i want to bring this up with steve here. do we talk about this now or 8:30, dave? okay, great. steve, you and i have been going back and forth on whether bernanke's policies are trickle down. we are going back and forth. i get that what's good for wall street is good for main street. but it seems to me it's taking its time and a lot of the stuff doesn't get down to those who need most. i don't know what kevin will stay about this, but, kevin, it seems those who need it the most aren't getting necessarily. >> this shows the limits of monetary policy. ben bernanke wishes he could get the stimulus and provide it to

the real side of the economy, the real hard-working middle class in the labor markets. the truth, monetary policy like the rest of government policy in the last few years, tends to favor those with wealth. it tends to favor those that are well connected. think about our tax code. the largest financial institutions that andrew has written about in great length. and real banks, the other 6,500 banks, are not getting huge benefits from free money at the central bank. largest institutions are, and it takes a long time for it to fin its way back to the economy. >> kevin, you long told me it's a blunt instrument, a lot of different cross current in the economy. let's talk about low interest rates. that's something i think probably hurts the wealthy more than it does anybody else, right? the wealthier or older people who are net savers in this economy. that's one thing. becky is talking about the chair's use of the stock market as a wealth effect against

something that benefits the wealthy. what is happening here, the purchase of mortgages is the only tool that bernanke has to really affect the middle class the most. not a great tool. obviously, wealthy people with big mortgages benefit more if they refinance. but when you think about the biggest asset of most middle class people, it will be the house. the lower interest rate. >> we talked about this. so many people who don't qualify for refinancing and these are people who are paying mother-in-l mortgages, never missed a payment. but for whatever reason, the banks won't work with them. i'm not blaming bernanke, it's a blunt instrument, but it seems to me, that he is probably frustrated by this too. the money not getting people that need the help the most. >> my rabbi says don't make the perfect the enemy of the good. many people won't qualify, but

many, emany people who will qualify. the best thing for individual folks, time to start calling your mortgage broker to see if it makes sense to refinance your mortgage, and you're right. a very arduous process. more so than it ever was. it could be something that saves people money and perhaps frees money up for subpoenaing. might spur housing growth. it's a flyer, but the other stuff not working great. >> okay. steve, thank you for that. former fed governor kevin warsh will stick around with us. the banks, too big to fail problem is still existing you think. >> bing, bing, bing. >> too big to fail. >> bing. >> we'll have that conversation at 8:30. thank you for stinging around, kevin. >> steve will be back with us at 8:30 too.

when we come back, tensions in the middle east rising. with the presidential election less than two months away, we'll talk politics and foreign policy with former new york mayor rudy giuliani, making his way to the "squawk" set right now. mr. mayor, thank you for being here. great to see you. on monday, we'll give nobel lawyer yet michael spence an hour to explain quantitative easing. platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime... tdd#: 1-800-345-2550 until i choose to focus on something else. tdd#: 1-800-345-2550 trade at charles schwab for $8.95 a trade. tdd#: 1-800-345-2550 open an account and trade up to tdd#: 1-800-345-2550 6 months commission-free online equity trading tdd#: 1-800-345-2550 with a $50,000 deposit. tdd#: 1-800-345-2550 call 1-800-836-8799.

just moments ago, republican presidential candidate mitt romney arriving at a new york hotel for a private fund-raiser. many high pr-profile guests expected to attend. wilber russ, alexander laventhal, woody johnson, david temper made news a year and a half, two years ago with the bernanke put. what was he talking about, a bernanke put? and john thain. joining us now, rudy giuliani, former mayor of new york city and we should point out a surrogate for the romney

campaign, who knows to this date, and i don't care how long it is for therom this date, i h told you how much you handled it at the time. if we talk about basically a terrorist attack that occurs on the same day, i will listen to what you say before i listen to the media or left-wing blogs that talk about how romney behaved. what was your view on how romney behaved? >> if it was me, i would have been outraged even more. i think the president the united states' feckless policy in the middle east is naive, almost childish support of these movements, without any real regard for what will come after. this is essentially what jimmy carter did to us in iran. we had the shock. a really bad guy, and then we got the i ayatollah.

then we had mubarak, friend of the united states, friend of israel, stabilizing influence. first instinct of hillary clinton, keep him. three or four days later, our leading from behind president decides we have to go with the mob, get rid of him. now we have the muslim brotherhood, and you see it on television every night. these people hate us and would like to come here and kill us. same thing in libya. a neutered dictator in libya. gahdafi gave up his weapons of mass destruction. a bad guy. a neutered bad guy that couldn't do anything to anybody. now we get rid of him. that government is maybe not so bad, but feeble. but we have al qaeda growing in libya. and taking out our ambassador. first ambassador to be killed, by the way, since jimmy carter. we see what happens in yemen. behind all of this, it's

something i warned people on september 11th. maybe i was politicizing things. you get it wrong, people die. what about iran? this president is fiddling while iran is becoming a nuclear power. none of the sanctions are working. he doesn't want to meet with netanyahu, because he is afraid that netanyahu might ask him to set a red line. of course there should be a red line. wars have happened in our history because of confusion. first world war happened because of confusion. he should set a redline. you go beyond this point, we're going to take out your nuclear arms. he doesn't set it because he's an equivocator, he is afraid he won't be able to live up to it. i think the president opwns it, helped create it. his naive attitude about islamic extremist terrorism which goes

down to never wanting to say the word, wanting to do away with the war on terror. how about it's irrelevant if we have a war on terror. they have a war on us. >> do you blame him directly for the attack? >> it's fair to blame him for the atmosphere that is created. i think these people have no fear. >> is it fair to blame president bush for 9/11? >>. no it's fair to blame doing nothing about islamic extimist terrorism. how about fail to blame 9/11 on failure to respond on "u.s.s. cole." bin laden became convinced we wouldn't do much about september 11th. fair to blame it on african bombings where we did nothing but put a few people in prison, didn't have a strong military response. >> one thing you have to admit. history rhymes, doesn't repeat itself. remember the last presidential candidate accused of shooting from the hip. a jimmy carter campaign ad, ronald reagan, a cowboy who

shoots from the hip. obama people should have looked at that before they wrote it. >> i think it should go further. i would do an ad that said we had hostages in the middle east under jimmy carter for two years. jimmy carter asked him to release the hostages and they said ha, ha, ha. ronald reagan in office two hours, and hostages released. don't do it, don't do it, don't do it, and they saha, ha, ha. what's he going to do? if they see romney, i think there will be a difference different response. my experience with islamic terrorists, which dates back to 1972. when we become complacent, we appease, they attack more. like in the '90s, attack on the world trade center in '93, didn't do anything, the guy that was going to bomb the subway.

morsi wants him released. i am outraged. this man wanted to bomb my city, and the head of egypt wants him released, and we're giving them $2 billion a year. are we out of our minds? >> we had john mccain on the show yesterday, talked about the funding that's there. he believes in still having some of the funding there and still having american presence there. do you agree with that? >> well, i would put it in jeopardy right now until they show eed us they can act like a decent government. morsi's comments are frightening. is he a terrorist. he comes out of the muslim brotherhood. until a year, year and a half ago when we were doing a revision of history on muslim brotherhood this was a terrorist organization we are very afraid of. president obama thinks we can appease in this situation. i don't think it's working. i think what we see on television every night is a result of president obama's feckless policy in the middle

east. his naive idea of positively tings and not having a good enough understanding who these people are, what these people are. and hillary clinton resisted most of this. hillary clinton's first instinct, keep mubarak, keep gadhafi. she said about assad, he is a reformer. you get a sense of foreign policy that's adrift? >> where do you put the killing of osama bin laden in this context? >> i give him great credit for that. great credit for that. unfortunately, i don't give him as much credit as he takes for himself. what he did in leaking the information is dangerous, disgusting, probably the reason you see a book like this is this -- you go after this guy who wrote this book, the s.e.a.l., he just says i'm just doing what boss is doing. the boss gives it away to hollywood. boss gives it away from hollywood. the information didn't come from the administration. administrations sources are quoted. come on. >> i read that too.

our guest host today is kevin warsh. you have a few thoughts about how maybe we have weakened our policy by some of the things we've done economically too. >> i'm scarcely an expert on foreign policy, national security, but i have heard admiral mullen and stan mcchrystal say that our most pressing foreign policy issue is the economy. i wonder if the mayor agrees with that. if we don't demonstrate we can take a shock to our economy, we will rally back, not showing those first principles, the rest of the world going to follow? if we don't demonstrate we know what prosperity means, will they be closing markets and shutting down? i suspect there is a key relationship twinkie international issues and the state of our economy. >> ronald reagan spent us into oblivion. he didn't use military -- didn't

kill anybody, didn't shoot anybody, didn't even threaten, just pointed missiles at them. but he spent us into oblivion, and i'm not sure that would have been possible if the american economy recovered under ronald reagan. ronald reagan took over a very difficult economy by the year of re-election. morning in america. our economy was growing. continued to grow. >> and conversely, state has centrally planned a plan that we have been able to keep up with. >> we have a weak recovery. an anemic recovery, we have unemployment for 43 straight months at 8% and we have 360,000 people coming off the work rolls. we're in a -- i wouldn't call it a disaster economy, but certainly a weak economy. we don't have the power we had then. >> mr. mayor, thank you for joining us today. appreciate your time. >> and 32-ounce big gulp for you

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to local businesses across the country so far this year. because the more we help them, the more we can help make communities stronger. they agreed to increase the policy accommodation by increasing additional agency backed mortgage securities. >> we showed 90% probability of this happening. >> markets are moving, traders are reacting. >> the idea to quicken the economy, help the economy quickly to grow enough to create new jobs. >> does that mean tolerance for inflation will be higher in coming years. >> we're at a five-year high on the dow jones industrial average. when we come back, breaking economic numbers. a few minutes away from retail sales and consumer price index

numbers. will they help or hurt the rally? u.s. equity futures up 40 points this morning dow up fair value. and squawk will be right back. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race.

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welcome back to "squawk box." seconds away from retail sales and consumer price index numbers. rick santelli standing by. rick leesman also with us. the numbers. >> up .6% on the consume every price index. that's the august read. exactly, exactly as expected. no revision last month. if we take out the all-important food we eat and energy that makes the economy move, it was less than expected. up .1%. year over year, 1.7 on headline. 1.9 on core. very close to expectations, but based on history of the last month, a little heavy, a little high on the month over -- excuse me, year over year headline and a little light on the year over year core. retail sales for august, as expected, maybe a little better. and up .9%. take out autos, left with .8.

take out autos and gas, the real number, up .1. nothing wrong with strengths in autos and airplanes, so let's, you know, up 9, up 8, up.-1. now the headline inflation numbers, you have to that i that away from the equation that, you know, the growth equation needs to speed up a bit, but just on the surface, retail sales not bad. the aftermath in the market. over 3% in a 30-year bond. all the entities, all the entities have been long mortgage-backed securities, buzz they are in the same club and they understand the same rorchet diagrams the fed. they should send thank you cards to everybody on the panel for windfall of profits they are now making. back to um. >> for more on the data let's get to steve leesman. and in light of what we -- you want to talk about these numbers, but i can't help but

think, steve, you were kind of wrong about qe3 for a long time. seeing what actually happened, just the size of the wrong innocence hindsight is staggering to me. steve. >> what do you want me to say to that, joe? that your assessment of my assessment is entirely wrong? i mean, what do you want me to say? >> remember how resistant you were -- >> that i correctly called there, would be no qe in union. correctly called no qe in august. who called to tell you about the call? and i correctly called it would happen in september. >> you can't ignore that voice. you didn't hear san tellittelli. >> he is implying that ben bernanke called and told you. >> i didn't say ben bernanke. they know a lot. >> you are saying i shouldn't do

what i think my job is, to be a reporter, and get as much information -- you understand i do my job and i'm proud of how i do my job. i don't care what you guys think, at the end of the day, guys. at the end of the day my job is to guide viewers and investors, give them the best heads up policy i can on what the fed policy will be, and i did it right. >> i wasn't even trying. normally i would be taking credit. >> that's what i'm saying, joe. >> you to a great job. >> my point was, steve. my point was -- >> what's your point? >> for a long time i think your view on whether there was a qe3, was based on whether there should have been a qe3. and i think that now we're seeing this. you heard kevin speaking -- >> can we -- can you listen for one second? we have breaking news that we're going to be announcing right now the markets are going to want to hear. there is a change in the dow jones industrial average this

morning. you are bringing out one component, putting in another one. joining us is david blitzer, chair of the index committee of. >> kraft kraft is coming out, submitting the company. united health care will join the dow jones industrials effective a week from monday morning. >> wow. so kraft is coming out, unh is coming in. this is just breaking. paying attention to a couple of these before looked like unh moving right before that came out. why now? >> why now? kraft will split it into two companies. the largest piece, 2/3 of the craft, 80% of its business outside the u.s. and the remaining 20% inside the u.s. and we felt it really wasn't the best choice for the

dow. why united health care? >> yeah, why united health care. >> the leader in health insurance throughout the united states. this is clearly both a large and exceedingly important industry for the u.s. economy. for the u.s. financial markets, and a large, large portion of americans, we felt health care insurance should be represented in addition to some major pharmaceuticals. >> no google or apple. used to blame presbo for crazy calls. are you the guy we can start making fun of now, david? >> i wouldn't recommend making fun. we have to make the choice and get the comment. clearly google and apple, with prices well into the hundreds, the way this index is constructed and has been run for over 100 years would be a bit difficult. >> i was looking back, david, at united health care and where it's come. the low over the last five years is april of 2009, down $17.90.

now trading above $55. as we've watcheded the affordable care act and wall street is pushing health care stocks higher and higher. you expect the trend to continue. health care is a bigger part. but one of the concerns when a stock is seeing that much of a run, can it continue? >> well, first of all, without having all of the numbers here, i think an awful lot of stocks have had a run from a low -- >> that's a fair point. >> but regardless of what happens to the federal legislation going forward, regardless of who we're looking at on the 7th of november with a smile on his face. health care major issue for everybody. we're not getting younger. i wish we were getting healthier. we can't guarantee that. >> some of the biggest positions are in united health. in fact, looking at a quick sort

of screen on 13fs. 55 major hedge funds have picked it up in the last quarter. >> how often has bob call said i kid about that. a lot of people making money. some of the people betting in a way that actually obama would win, they think that will -- >> affordable health care act passed in november of 2009. at that point, united health care shares at $29, $28. a lot of stocks have seen the big pushup. >> i think looking back, it's very difficult to peg, you know, this stock's rise or even health insurance overall to one single piece of legislation. even admitedly, probably one of the biggest pieces we've seen in the last four years. and much more important. its price in the economy, more than anything else. it's clearly something that should be included in what's the most watched stock index eye

seen. >> kraft sounds like it might have been the shortest tenure of any. that just went in. and what about alcoa. is that really representative of what we need, because the business it's in? market cap, almost a small cap. >> i think around $9 billion, a little big for a small cap actually. >> well, even united health care is $55 billion. alcoa, the stock has been under $10 forever and it doesn't seem like -- >> alcoa is not the only stock either by price or for that matter by market cap that is down at the low en, but it is -- >> aig in there, did get down to a single digit -- i know, i know. there are some other ones. didn't start at single digits with low market caps. they did after you picked them. >> you might note as a bit of irony, craft did replace aig.

same week, the u.s. government has taken its position in aig under 50%. we did notice that. >> that's correct. >> we didn't think we wanted to do any round trips. >> who was the runner up getting into the dow? >> we looked seriously at a half a dozen stocks after we narrowed down a hundred plus. as a rule, we don't count on who was the runner up, who was the brides maid or anything. >> there was a tech company that came in the final six? >> no, i don't think there was. i mean obviously, just about everybody is called up and whispered apple in one ear and goggle in the other ear and they both had the same issue we covered before. technology with ibm is reasonably well represented. and intel is also among the list.

i don't have concern that the dow is under technology. or underweighted in tech. >> great. david, thank you very much for bringing us this news, and for bringing it to us so quickly. we really appreciate it much. we'll continue to follow the changes that come through. thanks to rick and steve. sorry we didn't get to continue that conversation. >> thank you for coming on, david. a good time for breaking news. when we return, he's been very patient staying around the table. more from kevin warsh. we'll talk about too big to fail, the fed, and a lot of other issues after the break. when you miss "squawk box," you fall behind on global business news. when you fall behind on global business news, you make bad investment decisions. when you make bad investment decisions, you lose all your money. you lose all your money, you are tempted to hatch an illegal ponzi scheme. when you hatch an illegal ponzi scheme, you get roughed up in an

interrogation room. don't get roughed up in an interrogation room. watch "squawk box."

they agreed to increase the policy of accommodation by purchasing additional agency mortgage-backed securities. >> we showed 90% of probability of this happening. >> traders are reacting. >> ideas is to quicken the recovery, help the economy begin to grow quickly enough to sdwren rate new jobs. >> does that mean intolerance for inflation will be higher in the coming year? >> a gain of 200 points for the dow industrial average. a five-year high. >> welcome back to "squawk box." green arrows across the board, market could open 26 points higher, s & p would be 2 points higher and nasdaq up about 8 points. more from our guest host, kevin

warsh. one of the topics we haven't gotten to yet, how to think about the world of big bank asks whether we've done the right thing in the past four years since the financial crisis. >> so back in the time are you writing your books, we called them "too big to fail" institutions. now we call them sifis, systemically important financial institutions. the department of treasury names them. if they would call our government and say we have a problem, i fear we would be back with very limited options. the test of real reform is whether we've gotten rid of sifis, rid of those financial institutions. i think the facts aren't so kind. what i really fear, we have turned these into quasi public utilities. utilities stand atop the banking

sector, with the government, short of fiscal space, over the coming years, telling them exactly what they want them to do under dodd frank, only two things impermissible. one is losing money, the other is making money. other than that, they are just fine. >> what would do you? s >> if you are big as in bad, a big institution with lots of capital, lots of liquidity. so the taxpayers and government doesn't have to worry about bailing you out, then that's fine. but if you have been in harm's way for years and years and years, and you cannot demonstrate uniquickically to the government that your losses wouldn't require extraordinary actions, that's unacceptable and that institution should have to take some self-help. and we have really memorial eyesed too big to fail. >> we had dick on earlier this week on the show. and he believed the fed had all

of the powers then. meaning you had everything at your disposal then to rein in the risk and it wasn't taken. true? >> i can't imagine. some politicians talk about repealing dodd-frank. regulators can do virtually whatever they want to these institutions. so i don't really think it's about power what is dodd-frank about? when we double the nope regulators at jpmorgan, i think it's about the benefit of this diverse banking system with 65 institutions competing against each other. what do we have? public utilities at the top. special look, special support from the government. and 65 institutions having a hard time competing with them. it's not good. >> bart shelton sent a letter

today to ben bernanke about the volcker rule, where do you think bernanke's head is on this issue? i don't know where it is. but the volcker rule and all of the other measures in dodd-frank is principally about a government that is mixing managing these institutions. if we were great at it, we wouldn't have the financial crisis. my view, we have doubled down on market regulators, given up on market discipline and a capital reng eem that is way too complex. we need market regulation, but not with thousands of rules that no one can understand, and capital that's impossible to relate to. >> what are you doing over there? >> i don't know. nothing. he's in his early 40s. >> yep. >> 35? >> 35. can you get there. is it possible to get there. >> i can. >> are you reading between the

lines in this discussion. >> absolutely i can. >> any of this stuff, have you heard before. >> he sounds reasonable. >> i know. that's the whole m.o. >> i know that reputation, but we've got to -- you can do it in seven years. don't you think? with the right training. with me, can i get him there? >> i've been around this business for 20 years, if i looked at the financial statements for the largest financial firms in japan, europe, and the u.s. it would take me a long time to even know they were banks. we shouldn't accept that markets work as you and your listeners know when people can understand what they are buying. these institutions are far too cryptic, we need fundamental reforms and we can bring andrew around to this point of view. >> i think i'm not that far off. >> i wrote that down, the stuff at private markets better at allocating capital. >> we have to slip in a break. more, still ahead.

up next, a change in the dow. kraft is out now. united health care is in. we'll talk to jim cramer about his thoughts on that swap. >> very smart, though. at optionsxpress we're all about options trading. we create easy to use, powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! strategies, chains, positions. we put 'em all on one screen! could we make placing a trade any easier? mmmm...could we? open an account today and get a free 13-month e ibd™ subscription

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the dow jones industrial average after closing, let's get down to the new york stock exchange look. kraft, totally understandable. the switch-up. i remember when philip morris did the switch-up. you saw some big changes in the dow. this is similar. now i would tell you that this puts this index uniquely in the health care and drug business and i think it is a shame because there's been so much push in technology and yet our technology plays within the dow are pc related. this was a great opportunity

that was missed. >> we asked david blitzer about that, jim. he said everybody whispered in his ear the name apple, the name google. he thinks they're well represented by tech and that it didn't even make -- neither of those companies even made the final six that they were looking at for the next dow component. >> well, they were wrong. i do believe that when you're pc related, you're going to have to deal with the fact these very big cap stocks. i think there are two forms of tech. there is the old tech and new tech. intel is distinctly part of old tech. pc related does not represent what's going on in the new part of technology, particularly the part that is overweighted. they're using cisco as the reason for, i imagine, to be able to say, listen, we're not all pc tech. just unrealistic. i thought your questions were dead right. united health? you throw that -- like fine.

how about wallgreen. >> were you working for bernanke yesterday lowering expectations? >> oh, yeah. entirely. >> you said there's no way it would be enough. washington said they formally transformed what the fed will do for years to come. >> wapner's show was on fire yesterday. dichotomy, you had the sullivan thing -- yeah. but there was this moment where stephanie link and josh brown were arguing. what do you need to see it up 500 points before a real rally? of course it was a real rally. it is sticking with us the next day. you could say that cramer, you set them up for yound promise so we overdelivered. i have to tell you that i think the fed chief was saying, listen, we're in it until we get unemployment at 6%, don't bother me, not now, not ever. >> if you got prices like they are and tips all that and you're supposed to do both, i don't see how you really can't fault him.

he's got cover. >> i thought he said go buy bank of america. i heard that was the subtext. go buy bank of america. >> you guys didn't talk about this beforehand about lowering expectations. that's leisman. >> you and leisman are really going at it. i kind of like it. >> i'm sending e-mails to him from peter schiff and cc'ing santelli. >> i think it's fabulous. boy, this is a greet debate. >> thanks, jim. coming up, parting shots from our guest host, former fed governor kevin walsh. [ male announcer ] eligible for medicare?

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welcome back to "squawk box," everyone. we've had a great conversation with the former fed gopher. kevin, we really appreciate you being here. a lot of our conversation has been a little downtrodden about how difficult this could be for the fed to get out of what it's

now embarked on. is there anything that makes you hopeful about the future? >> so it does. we still have the most resilient, dynamic economy anywhere in the world. we still have great entrepreneurship, great innovation, the best universities in the world. and in spite of all these policies, most hard working americans are trying to get back to work. we're growing productivity. i'd rather have our challenges than the challenges of nef our big trading partners. ben bernanke went big overnight. he he decided that monetary policy was going to be more permanent than i might like. let's hope that the fiscal policymakers and the rest in washington decide fiscal policy also needs to be permanent so we know what our taxes are going to be and we know what our spending is going to be and we can get our budget deficit back under control. >> do you think it is crazy to have the euro at 1.30? >> i think relative interest rate differentials are making the difference now. ultimately when one central bank steps up, the others usually follow. we'll probably see that over